An Experimental Test of the No Safety Schools Theorem

David Johnson () and Matthew Webb

No 17-10, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: In simultaneous search problems individuals choose a portfolio of risky options from a larger menu of options with utility determined by the portfolio’s option with the best ex-post outcome. Chade and Smith (2006) examine simultaneous search problems and show that the optimal portfolio includes the utility maximizing option and others that are riskier. However, Pallais (2015) shows that when individuals apply to more colleges, their decisions are inconsistent with theoretical predictions. We replicate this ?nding experimentally and show that subjects select similar portfolios when the payo?s are independent, suggesting subjects ignore the rival nature of the options.

Keywords: Decision Making; Simultaneous Search; Correlation Neglect; Online Experiment; College Application (search for similar items in EconPapers)
Pages: 39 pages
Date: 2017-09-06
New Economics Papers: this item is included in nep-exp and nep-upt
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Published: Carleton Economic Papers

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